Investments

Are you obtaining the best return from your savings?

Regularly reviewing the performance of your savings and investments is essential to ensure they remain aligned with your goals, time horizon and tolerance for risk. Markets move, tax rules change, and what was suitable last year may not be optimal today. The right approach for you will depend on age, income, objectives and how comfortable you are with ups and downs in value.

At Holland & Co in Widnes, we help clients across Warrington, Cheshire and the North West make the most of tax-efficient opportunities while keeping risk and liquidity needs in view.

Tax-efficient investment routes to consider

Pensions

Pension contributions remain one of the most tax-efficient ways to build long-term wealth. You receive tax relief on qualifying contributions, investments can grow free of UK income tax and capital gains tax inside the pension, and planning options at retirement can help manage your tax position when drawing benefits.

We can review annual allowance usage, carry-forward opportunities and optimal contribution strategies for directors and the self-employed.

Individual Savings Accounts (ISAs) and Innovative Finance ISAs (IFISAs)

ISAs allow tax-free growth and withdrawals. Cash ISAs suit short-term needs; Stocks & Shares ISAs are for longer-term investing; Innovative Finance ISAs give access to peer-to-peer lending within an ISA wrapper. Suitability depends on risk, time horizon and liquidity requirements.

Venture Capital Trusts (VCTs) — in depth

VCTs are UK-listed investment companies that pool investors’ money to back small, early-stage and growth businesses. They exist to channel funding to companies that may struggle to raise capital through traditional routes. In return for accepting higher risk and a multi-year holding period, investors may receive attractive tax benefits:

  • 30% income tax relief on new VCT subscriptions (up to £200,000 per tax year) if you hold the shares for at least five years.

  • Tax-free VCT dividends.

  • No capital gains tax on disposal of VCT shares acquired via a qualifying subscription.

How VCTs work

  • Your money is invested by a professional manager across a portfolio of smaller UK companies.

  • Most VCTs target regular, tax-free dividends sourced from portfolio exits and income.

  • Shares are listed on the London Stock Exchange, though liquidity is typically limited; most investors participate in manager-run buybacks rather than relying on the open market.

Who might consider VCTs

  • Higher-rate or additional-rate taxpayers seeking to complement pensions and ISAs once allowances are used.

  • Investors with a 5–10 year horizon who can tolerate volatility and understand the risk of loss.

  • Individuals looking for tax-free income streams via dividends.

Key risks and practical points

  • Capital is at risk: investee companies can fail, especially in downturns.

  • Liquidity is limited: although listed, spreads can be wide and buybacks are not guaranteed.

  • Fees are higher than mainstream funds due to the specialist nature of the asset class.

  • The 30% income tax relief can be clawed back if you sell within five years.

  • New offers (fund-raisings) can fill quickly each tax year; early reservations are often helpful.

Worked example (illustrative only)

Invest £20,000 into a new VCT offer. If you have paid at least £6,000 in UK income tax this year, you can claim £6,000 (30%) income tax relief, reducing your net cost to £14,000. You then receive tax-free dividends over time. If you sell after five years or more, any gain is free of CGT. Outcomes will vary and capital is at risk.

Enterprise Investment Scheme (EIS)

EIS supports smaller, higher-risk companies by offering generous reliefs: 30% income tax relief on qualifying subscriptions, CGT deferral on reinvested gains, potential loss relief against income, and potential inheritance tax relief after two years via Business Relief eligibility. EIS shares are unlisted, illiquid and higher risk than VCTs but can offer greater upside on successful exits.

Seed Enterprise Investment Scheme (SEIS)

SEIS targets very early-stage companies with even stronger incentives but higher risk: 50% income tax relief (within SEIS limits), CGT reinvestment relief and potential loss relief. Suitable only for experienced investors comfortable with start-up risk.

Quick comparison

Feature Pension ISA IFISA VCT EIS SEIS
Up-front income tax relief Yes (within allowances) No No 30% (hold ≥5 years) 30% 50%
Tax on income/dividends Inside wrapper: tax-free Tax-free Tax-free Tax-free dividends Taxable (outside wrapper) Taxable (outside wrapper)
CGT on disposal Inside wrapper: none None None None (qualifying) CGT-free on growth; deferral available CGT-free on growth; reinvestment relief
Liquidity Low before retirement High Varies Limited Very limited Very limited
Risk level (broad) Low–Medium (depends on assets) Low–Medium Medium–High High High Very High
Typical horizon Long term Short–Long Medium 5–10 years 5–10 years 7–10+ years

Our approach

  1. Clarify objectives and constraints
    We start with your goals (income, growth, retirement age, business cashflow), time horizon and required liquidity.

  2. Optimise allowances and wrappers
    We sequence contributions across pensions and ISAs, then consider specialist routes like VCT/EIS once core allowances are fully used.

  3. Assess suitability and risk
    We match solutions to your risk profile, tax position and cash needs, avoiding over-concentration in illiquid assets.

  4. Implement and monitor
    We help with offer selection, application and relief claims, then review annually to keep you aligned with goals and changing tax rules.

Frequently asked questions

Do I need to use my pension and ISA before looking at VCT/EIS?
Usually yes. Pensions and ISAs are the foundation for most UK investors due to their simplicity and broad suitability. VCT/EIS can complement these where appropriate.

Can I carry back VCT/EIS relief to the previous tax year?
EIS often allows carry-back (subject to rules and limits). VCT relief applies in the tax year of share issuance. We’ll confirm timing for any specific offer before you commit.

What happens if I sell a VCT within five years?
HMRC can claw back the 30% income tax relief if you dispose of the shares within the minimum holding period.

Are VCT dividends guaranteed?
No. Many VCTs target regular dividends, but payments depend on portfolio performance and board decisions.

Important risk information

Investments can fall as well as rise and you may get back less than you invest. Smaller company investing (VCT/EIS/SEIS) involves higher risk, limited liquidity and longer holding periods. Tax treatment depends on individual circumstances and may change. Reliefs require compliance with HMRC rules and minimum holding periods.

Next steps

If you’d like a clear, personalised plan that uses the right mix of pensions, ISAs and—where suitable—VCT/EIS/SEIS, we can help.

Email: nigel@hollandandcompany.co.uk
Tel: 0151 420 6666
Office: 102 Widnes Rd, Widnes, Cheshire, WA8 6AX

Serving clients in Widnes, Warrington, St Helens, Liverpool, Manchester and across the North West.

How we can help business owners

  • Optimise director pension funding alongside salary/dividends.

  • Sequence ISA and VCT subscriptions around company cashflow.

  • Use EIS/SEIS selectively for growth-oriented investors with surplus capital.

  • Coordinate with exit planning and inheritance tax strategy.